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Determination of employee status and contract value

We will discuss labor law again in this column, but from a more general perspective, so that employers and employees alike can evaluate compensation, rights and duties under the law.

Korean labor law has several unique features, such as severance pay and presumptions of permanent employment, which can catch foreign employers off-guard if they are not fully aware. But of course, not knowing the labor law cannot be an excuse to avoid employers’ liability.

When one party works for another, the most important inquiry is whether the position is regular, or that of an independent contractor. Labor law protects employees and guarantees certain minimums, and employers have the obligation to pay certain taxes and insurances.

It is not as simple as what the contract says ― although that is one factor. Supervision, location and control of work, ownership of equipment, payment structure and other factors are also considered by the courts if there is a dispute.

In a recent decision still under appeal (and therefore not final), the visa status of the employees was a crucial factor. Essentially, because E-visa holders cannot work outside of their sponsor’s establishment without permission from the sponsor and Immigration, the court held that E-visa holders are employees. So technicians (E-7), teachers (E-1 or E-2) and others may well be employees regardless of other factors.

When the worker is an employee, it affects the issue of compensation. Since the labor law mandates certain time off in addition to compensation schemes, creating legally structured agreements with certain employees can be difficult. Flextime employees are also subject to different compensation rules. Agreements for managerial employees, expected to put in more than 40-hour workweeks, will need more careful structuring. In addition, some conditions (such as annual leave) only apply to workplaces with more than five employees, so the conditions can vary depending on the size of the establishment.

Contracts must be written clearly and include wages, hours, holidays, leave and other material terms. Placing specific procedures for calculating payment and raises, bonuses, and the circumstances for award or punishment is helpful in preventing disputes. Of course, some punishments (like dismissal without cause) will be illegal, whether or not it is written in the contract. The general principle of law, equally applicable in this context, is that the law supersedes the contract when the two conflict.

Annual paid leave is 15 days per year and begins to accrue proportionally after the first month, assuming no absences. If leave is not availed, it expires in one year after accrual, and the employer needs to compensate the employee. The compensation can be avoided if the employee is encouraged to take leave during a certain period, and certain notices before expiration are given. There are also other legally mandated leaves including menstrual, maternity and injury related.

By Yuna Lee and Darren Bean

Yuna Lee is a Korean attorney at Seowoo & Minyul Law Firm in Seoul. You can read her blog at or if there is a legal issue you would like to be addressed, email ― Ed.

This column is not intended as legal advice. No action should be taken or avoided based on this column, no attorney-client relationship is formed by reading this column or contacting the authors, and the authors expressly disclaim any liability for the content of this column. Those with legal problems in Korea should seek advice from an attorney.
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